Moving the B40 group up the ladder through sustainable aid

Moving the B40 group up the ladder through sustainable aid
According to data from the Department of Statistics Malaysia (DOSM) in 2016, households which earn below RM4,360 per month are in the bottom 40% of all households . It should be noted however that the income threshold varies between states. For example, household earning RM5,870 is considered as T20 in Kelantan but in Kuala Lumpur, they are in the bottom 40% . These households are also known as the B40 group and are most vulnerable in cases of economic shock. The B40 group often receives great attention from the government, as can be seen in the Budget 2019 , where:

• RM5 billion is allocated for the cash transfer program, Bantuan Sara Hidup (BSH), targeting 4.1 million households earning less than RM4,000 per month.
• For education, the government agreed to exempt loan repayment for students in the B40 group who obtained first class honours. This was later expanded to include the M40 group as well .
• A health insurance scheme for the B40 group, costing RM2 billion and funded by Great Eastern Life Insurance, will provide free protection against 36 critical illness up to the sum of RM8,000. Besides that, a daily income of RM50 per person will be provided for those hospitalised in government hospitals for a maximum of 14 days .
• There are also many other aids such as fuel subsidies, electricity subsidies and building affordable housing.

Overall, the budget covered the main areas that needed attention. Cash transfer programs deal with the increasing cost of living, loan incentives encourage students to do well in their studies and most importantly, a safety net is provided for the most vulnerable groups. The health insurance scheme in particular would be really helpful to lower income groups which often cannot afford to purchase insurance. They are often considered as groups at risk of falling into poverty. Although the poverty rate is very low, at only 0.4% in 2016 , this figure might not show the right picture as it does not include the at-risk group.

The report “The State of Households 2018, Different Realities” by Khazanah Research Institute (KRI) notes that in 2016, households with a monthly income of below RM2,000 spent 94.8% of their income on consumption items, with only RM76 remaining after accounting for inflation . This shows that they are very vulnerable towards any emergencies or economic shock, and are often only one accident or illness away from falling into poverty. Thus, the health insurance is definitely a good move by the government, providing a safety net for those most vulnerable towards falling into poverty. Without having to worry about any serious medical issues, the B40 group will have more funds available for other purposes. In future, one suggestion will be to further divide the B40 groups into four groups – extreme poverty, poverty, at the border of poverty and those reaching to M40. This will help policies to be better designed for each category of lower income groups.

Next, instead of just providing help and subsidies whenever the poor needs it, focus should be on helping them to self-sustain, and provide access to climb up the social ladder over time. Government aid should not be limited to providing direct help as it will only solve the immediate issues of the poor. With cash transfers, subsidies and safety nets provided, aid should then focus on improving the well-being in the medium and long term. The findings from the report “Climbing the Ladder: Socio-Economic Mobility in Malaysia” in 2016 by KRI shows the importance of tertiary education in improving income levels . Children with tertiary education are 4.6 times more likely to move up the income quintile than those without. Similarly, children without tertiary education are 6.1 times more likely to be downwardly mobile. Thus, the government should focus on providing equal opportunity to pursue tertiary education regardless of the income level of a person. One step is to focus on making education more affordable for the B40 group. Waiving the PTPTN loan for top achievers from the low income group is a good step in that direction.

To make it into tertiary education, one has to first go through primary and secondary schools, and aid at this level is important as well. One method is that instead of just providing cash transfers, the government should provide in-kind transfers such as educational materials or vouchers for the B40 group which can only be used for education related goods or services. The concept is similar to the previous “1Malaysia Book Voucher” programme for tertiary students, only expanded to cover more goods and services to provide more flexibility. For example, the vouchers can be used to purchase books and stationeries. Vouchers should also include transportation fees for travelling to schools, because rural households are usually located far from schools. Such subsidies will encourage parents to continue sending their children to schools. Other methods can include building better infrastructure and schools in rural areas, or providing more educational opportunities to B40 students. The recent move of introducing a 60% quota in boarding schools for B40 students is a good move in this direction . The idea is to provide a fair chance for poorer students to get quality education and move up the social ladder.

Therefore, recent government policies did quite well in laying down the foundation for aid to the B40 group in solving their immediate issues. Government should then move on from immediate issues and look into medium- and long-term aid. The World Bank report “Malaysia Economic Monitor December 2018, Realizing Human Potential” emphasizes the importance of having a good social safety net system and education in developing Malaysia . The key in helping the poor is to ensure there is access to upward social mobility. Providing equal opportunity to obtain education is important for social mobility and ensures the B40 group is not left out.

Liew Yit Wey (Bachelor of Business and Commerce (Honours), Monash University Malaysia) is an intern with ASLI Centre for Public Policy Studies (CPPS), November 2018 to February 2019.